Sorry, The Idea That You Will Be Able To Get Rid Of Cable And Watch Your Favorite TV Shows Is A Fantasy

Microsoft's Ben Thompson has written two posts on his blog
explaining why why the so-called "bundled model" of cable
programming –– in which we are forced to pay for every channel,
instead of picking just the ones we want –– is here to stay.

Under the
current model, every household pays about $5 to have ESPN
included with their cable subscription. Since fewer than 5% of
households actually watch ESPN, each of these households would
have to pay about $100 each month if they wanted to get it by
itself for ESPN to generate the same amount of revenue.

In his second
post, Thompson explains why we can't just pay the networks directly for creating
content (except, of course, Netflix). Here, he makes an
analogy to Silicon Valley: the networks are like venture capital
firms who invest in perhaps ten companies while expecting nine of
them to fail.

Channels like
AMC are able to make big bets like investing $2.7 million per
episode of Mad Men because the affiliate fees they get from the
cable networks give them the capital they need to take risks.
While the big profits come from the hit shows like Mad Men and
Breaking Bad, they wouldn't dare risk such sums on these
groundbreaking programs to begin with if they could only rely on
ads and direct sales through venues like iTunes and
Amazon.